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Essential Tax Forms for Every Nonprofit
Essential Tax Forms for Every Nonprofit
If your organization has legally incorporated and is operating as a nonprofit, filing your nonprofit tax returns will look different for your organization than for other kinds of legally incorporated entities filing tax returns. Because most nonprofits don't have to pay the taxes that individuals and companies do, filing taxes for them is relatively simple. There's no need to worry about self-employment taxes or quarterly tax payments.
The 501c3 tax-exempt status that legally incorporated nonprofits enjoy means they don't have to pay taxes, and so they aren't actually required to file a nonprofit tax return. But that doesn't mean tax season is a breeze for 501c3 nonprofit organizations. To maintain that 501c3 tax-exempt status, they have to file a Form 990 with the IRS to be in step with state and federal regulations and show the IRS that they're living up to the purpose they were incorporated for.
The process of filing any tax form for incorporated entities, such as LLCs, partnerships, sole proprietorships, S corporations or C corporations with the IRS can seem daunting, and it's no different with the forms for nonprofits. As with any IRS form, there are some FAQs that you'll want answers to.
Table of contents
What is the IRS Form 990?
This is the tax form that organizations operating with 501c3 tax-exempt status must fill out each year and submit to the IRS. It's what the IRS uses to evaluate whether your nonprofit is operating as it should to continue qualifying as a non-profit, 501c3 tax-exempt organization. Essentially, it's the government's way of keeping nonprofit organizations honest. Like other common tax forms, including Schedule C and Form 1040, Form 990 is an imporant part of the tax filing process. Versions include the 990 EZ and the 990 N. When calculating any type of taxes, it's best to have a small business calculator on hand.
Why is it important to file a Form 990?
There are some reasons to file a Form 990 beyond the fact that it's a requirement to maintain your 501c3 nonprofit's legal status.
- Accountability is a good thing. No one likes filing taxes, but it's also an excuse to take a 360-degree look at your organization's finances on a regular basis. It can be an opportunity to spot inefficiencies or notice something that needs fixing.
- It gives your organization transparency. Form 990s are considered public record by the IRS, meaning anyone who wants to have a look at your nonprofit's finances is allowed to. So your supporters, for instance, can have access to information they might want in order to know whether your organization continues to deserve its donations.
- You can risk penalties if you don't file it. If your nonprofit does not end up filing a Form 990, you could risk losing your 501c3 tax-exempt status, and you might not be able to receive donations that would be tax-deductible for your donors. There can be steep fines levied against your nonprofit by the IRS, too.
Which 990 form does my 501c3 nonprofit need to file?
Depending on the size of your 501c3 organization, you will choose from one of several different 990 forms. In general, larger nonprofits will file the standard IRS Form 990, and smaller organizations file shorter versions of that.
To figure out which form you'll need for your organization, you'll need to know its annual gross receipts or the total amount of money it has received from all sources. You will also need to know the total amount your 501c3 organization has in assets.
Form 990 N
This form is also called the 990 postcard, because it's literally the size of a postcard, and it's the simplest version of the tax form. The 990 N is for 501c3 nonprofits that take in $50,000 or less during their fiscal year.
The online form has eight questions that let nonprofits quickly submit the required financial information that the IRS requests. For this form, you only need to provide your EIN, which is your federal tax ID number, your tax year, the name and address you incorporated the nonprofit under, the name and address of the main officer and proof that the nonprofit did not receive more than $50K.
990-EZ
If your 501c3 nonprofit has gross receipts under $200,000, and has assets worth less than $500,000, you can use this four-page form that asks for more detailed financial information. You will have to fill in financial data from your balance sheets, and you'll need to talk about your nonprofit’s work, including programs and accomplishments. You will also have to itemize your grant information.
990
This is the form to file if your nonprofit has over $200,000 in gross receipts and over $500,000 in assets. On this form, you'll add more information about who you are and what you do, including your mission and what you've accomplished as a 501c3 organization. You will also need to record detailed information from your financial records.
Do I also need to file nonprofit tax forms with my state?
The IRS Form 990 is a federal tax form, which applies to any nonprofit anywhere in the US. States also have requirements that nonprofits need to fulfill in order to keep their nonprofit status, and they vary from state to state. If you're a nonprofit in the state of New York, for example, you're required to fill out a Form CHAR500.
Check the list of state requirements here.
Who can see my Form 990 information?
When you fill out your nonprofit's Form 990 and file it with the IRS, it becomes available to be searched for and viewed by anyone. By law, 990s are documents the public has full access to once filed. This is to maintain full transparency about what a nonprofit is doing and how it's operating so that nonprofits are compelled to follow the regulations set out for them by the IRS. It also helps donors, potential donors and other supporters know everything about a 501c3 organization before they decide to donate.
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